leo8530
12/11/2015 17:02 EST
Hi, I'm buying a second apartment in Rio Negro.. I already own one in Medellon Both are in construction I might rent them out when I'm not there only planning on spending less than 6 months to avoid tax residency in Colombia does anyone know of the tax implications of owning 2 apts like this Thanks, Leo
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saiid20
12/11/2015 22:06 EST
Here's what I know:
If the assessed value of your two properties is over 123 million, then you must file...and pay. Just how much I'm not going to even try to get into. Whatever percent is charged is somehow reduced by provable purchases during the year. What your assessed value is can be found on the impuesto predial that you get when property is purchased. The govt also has a copy.
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leo8530
12/11/2015 23:20 EST
Thanks so much for the info.
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Patricio
12/11/2015 23:38 EST
OP, wasn't that such great news from your first responder.?
Pretty much what you were wanting to hear, the great news after your wise acquisitions, right?
Or probably not, getting a little complicado aqui.
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fecherklyn
12/12/2015 19:42 EST
@leo8530
Sorry Leo, my curiosity is too strong; I just have to ask you this question.
Did you really enter into property acquisition agreements for these two Medellin properties and send money for the deposits and construction advance costs, WITHOUT KNOWING YOUR TAX SITUATION IN COLOMBIA on the eventual rental incomes, or repatriation of sales proceeds to the USA? Surely you used a local realty agent for the paperwork? What did he say?
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leo8530
12/12/2015 21:58 EST
I used a lawyer to do the deals but the second apt purchase happened so fast I didn't have time to figure it out. The 2nd apt would have sold in days I needed to move fast the entire apt building sold in days without a model or even breaking ground that's the way it goes here with good new apartment buildings and I had to get back to the USA I found it myself the good buildings do not use outside real estate brokers they don't have to they sell themselves with the internal salespeople who r usually pretty good so I'm trying to figure out the tax situation now worse comes to worse I sell at a profit
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guestuser
12/13/2015 08:36 EST
I'm probably too cautious but judging the quality of an apartment building without any model or groundbreaking would make me nervous. However, one thing that I have seen is that when apartment buildings are being out in a lot of locals pile in to 'buy' the apartments. Come completion of the building a lot of 'Vende' notices appear in the window. There are two new apartment buildings behind our home and there at this stage, months after completion, more empty apartments and others with the for sale notices in than are occupied. So you might find on completion that you're not alone in trying to sell, whether at a profit or not. Part of the problem is that just about the only way to get any tax relief here as a local is to put money (from the pension fund) into property. Look at all of those new 'finca' parks being built on the road to the airport. My guess is that some of those buyers are pretty stretched and betting on being able to flip the property at some later date. Of course money may have been pulled from the local stock markets (this years price action would suggest that) but any improvement in those markets and money might start to flow away from property back into equities. Add to that the likelihood of rising interest rates and you've got a reasonable cocktail of ingredients that could suggest a property bubble here.
And on selling there will be tax implications resident or not plus I would guess no realization of any losses taken on the value of $s imported to buy any properties.
From my point of view Colombia is a great place to buy nice properties at low ($) prices to live in. But invest? Well maybe for the long term but short term I think it's poor return/risk scenario for foreigners.
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leo8530
12/13/2015 10:41 EST
Thanks for your info
I don't plan on selling these apps
They r for my family to spend time here in
So I'm not an investor just a vacationer
I doubt if I will but anymore properties here
Not interested in being a invested
Just want something to enjoy with my family
Thanks
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rafapark
12/14/2015 15:03 EST
I have and apartment in Medellin that I rent and I live in the US. My situation might be a bit different than yours but maybe not. I am an American Colombian and live in the US. According to article 247 which was modified in 2012, I now have to pay 33% tax on the rental income while in the past I paid zero and this is considering that I am NOT a resident of Colombia for tax purpose. They just changed the law and the 33% tax rate is a fixed one for Colombians who have income in Colombia but don't live there. Makes no sense but that is the law. You may want to check if this applies to you. Tax laws in Colombia change often and when that happens is usually bad news for you. Ask your tax lawyer or a good accountant ( a very big challenge to find a good one who is familiar with the current tax code)
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leo8530
12/14/2015 18:11 EST
Thanks mucho for the info
I will check on it
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leo8530
12/14/2015 18:11 EST
Thanks mucho for the info
I will check on it
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dliss62
12/16/2015 15:10 EST
leo8530,
I may be totally wrong, but given the discussions on previous threads, I would think the moment you buy property in Colombia, you automatically establish residency and get caught in the worldwide tax net. It only stands to reason that once you declare any type of asset to DIAN, they will want your U.S. tax return or any source of income to justify ownership.
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guestuser
12/17/2015 08:27 EST
To get the residency visa based on investment I think that the amount is just over COP 200 million. Interesting thought about the level of investment needed to default into a tax 'residency status'. If nothing else if you bring in $s to invest through the formal process you're probably setting some triggers anyway. And if you being in $s without going through the formal process taxes are probably the least of your problems!
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dliss62
12/17/2015 14:58 EST
200 million COP is alow threshold. Bringing in money through "informal" channels makes it subject to forfeiture. Colombia and U.S. will assume it's drug trade proceeds.
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bigjailerman
12/17/2015 14:59 EST
What is meant by informal channels?
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guestuser
12/18/2015 07:31 EST
'Informal channels' covers a multitude of activities, none of which are going to be legal. To get the money from the US into a Colombian bank account you're going to need to go through the central bank approval process. In Colombia you can't just have money from your overseas account just sent and changed into Pesos and sent to a local bank. I guess you could fly multiple times to the US, bring back bank notes (remembering the restrictions on both ends about exporting and importing cash) and then try to get it changed into Pesos by some Cambio and then deposit it at the Bank but it's going to be an expensive process, have a long paper trail and - and my guess as you'd be trying to avoid the central bank reporting process - illegal.
I've heard stories of Colombians willing to take at least part payment in dollars in the US or elsewhere, but personally I'd avoid that.
There's a difference here between using your ATM card to take out a couple of hundred dollars in Pesos for groceries and paying for property.
The process I used was this, with the help of a local lawyer.
- Lawyer establishes a trust here with a company
- Through the trust the sources of funds (how I came to have the money, tax paid, all of those sorts of issues) was checked; standard anti-money laundering stuff
- TT'd dollars from my bank in the US to the Bank in the US used by the trust (in this case Citibank)
- Trust exchanges $s at Citibank into COPs
- COPs placed in the trust
- Lawyer then administers the trust. So the lawyer makes the payments from the trust not just to the sellers but any legal fees etc.
- When the purchase is complete any remaining funds can be released, less of course what you need to pay the lawyer.
That process incidentally allows you to get Colombian Residency if the 'investment' is above certain levels. I know that's not your intent, but it may help others.
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8901
12/21/2015 19:26 EST
So if the new law says you must pay taxes if you own a property worth over 123 million pesos and I'm doing my math correctly 123,000,000 / 3,400 = $36,176 U.S. ???
Is this a one time tax or makes you a kind of stake holder and are on the hook to pay taxes every year ?
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8901
12/21/2015 19:29 EST
How much did the lawyer charge you for setting up this trust to bring money into Colombia to buy a property ?
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guestuser
12/22/2015 08:38 EST
In response to the two questions on the purchase of the property
- the lawyer charged 1% on the amount of the trust
- notary, taxes, transfer fees and fees came to around 2.75%
The fees, including the lawyers fees seemed pretty fixed, there wasn't a lot of negotiation.
On the tax and fees they might not be totally representative. I bought the apartment with my now wife, a Colombian citizen with funds in Colombia. The fees taken from the account represented the full purchase account whereas the notional of the trust did not include her contribution to the purchase amount.
The same lawyer worked on my residency visa (based on the investment of the property). Those fees aren't included here.
Also the property was not paid in installments (as would be the case with a new property) but as a deposit with a single payment on closure. There were also no significant problems in the purchase - nothing that required any legal issues to resolve.
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leo8530
12/22/2015 09:44 EST
Thanks for the info. Can you give me the name of your lawyer and does he speak English.
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guestuser
12/22/2015 10:05 EST
Yes, he's based in Medellin
His email address is
[email protected]
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charleymike
1/2/2016 22:45 EST
For those of you who are in marriages where one spouse is Colombian and the other American, is there any advantage to having only one or the other partner as sole owner of the property for tax purposes? Or should the property be held by both H&W.jointly? Any thoughts?
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CAtoMDE
5/3/2016 22:27 EST
Charleymike - did you ever get a response to your question? I too am interested.
Thanks!
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leo8530
5/4/2016 00:03 EST
I just set up a brokerage account at Alianza. You are going to have to fill out all the FATCA paperwork for the governments
Then u wire the money to your Alianza brokerage account
Sell the dollars.
Fill out form 4 for the government
Then they will transfer the money to ur escrow account
Mine is also at Alianza
Then you should be fine with the governments
And also to sell the property without a problem.
I set this up with my Andres Durango of Medellin Legal Partners.
I don't think you need to set up a trust.
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charleymike
5/13/2016 13:01 EST
CAtoMDE: I did not get an answer. I suspect everyone is reluctant to give legal advice and no one wants to speculate and possibly mislead us. I respect that. A lawyer and an accountant or banker should be consulted by anyone trying to decide how to title property in Colombia. There are many potential issues, not least of which are: what happens in the case of death, or divorce? (You definitely should have a simple Colombian will if you own property here. That's just common sense.).
That said, I have since learned that if you are interested in obtaining a residency visa, then the American citizen alone should purchase the property in his or her name only in order to receive credit for the direct foreign investment. Hope that much at least helps.
As for government interference, and tax liability, I just read that members of our esteemed U.S. Congress have expressed 'great alarm' at the Panama Papers revelations and a move is afoot to make foreign investment and property ownership even more "transparent", i.e. accompanied by ever increasing and ever more complex and burdensome reporting requirements. (They may be after the tax evading billionaires, but it's you and me who feel the pinch. The billionaires just hire expensive professionals to discover and exploit the next tax dodge.)
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